Corporate results: SSGC announces 32% lower profits for first half of fiscal year

Earnings will change following a court decision on a petition filed by the company.

KARACHI:

The Sui Southern Gas Company (SSGC) has released its earnings announcements for the first half of fiscal 2013, announcing its earnings for both quarters as well as its result for the entire first half of the fiscal year. The company’s earnings dropped 32% to Rs1.05 billion in the first six months of the financial year, if compared with the same period of the preceding year.

The company earned only Rs46.33 million in the December quarter, compared to Rs1.00 billion in the quarter ended September 30, 2012. The company’s second quarter results were down primarily due to the significantly higher charges recorded under the gas development surcharge head. As compared to only Rs132.59 million in the September quarter, the surcharge was recorded at Rs4.51 billion in the December 2012 quarter.

Meanwhile, SSGC’s administrative and selling expenses shot up 55%, while other expenses were also higher by 64% in the first half of fiscal 2013 as compared to the same period of fiscal 2012. The company also incurred higher financing costs (up 13%) as compared to the same period of the preceding year.

Information released along with the results states that the accounts have been prepared on the basis of ‘estimated revenue requirements’ given by the Oil and Gas Regulatory Authority (Ogra).

SSGC operates with a fixed rate of return (before financial charges and tax) of 17% per annum on the net average of its fixed operating assets under a tariff regime governed by Ogra.

The company has said that Ogra has taken the Sindh High Court’s stay order regarding an increase in unaccounted-for gas (UFG) ceiling into account while determining this tariff. The court has directed Ogra to treat the UFG benchmark as fixed at 7% for the remainder of the ongoing fiscal year, and also to treat certain incomes as non-operating incomes till it provides a final decision on a petition filed by SSGC.

The company’s other non-operating income was higher 42% in the first half of fiscal 2013 as compared to the same period of the preceding year.

The court’s decision will mean the difference between a profit and loss for the period. SSGC says it will incur a loss of Rs3.60 billion if the decision goes against it. If it is decided in its favour, it will add an amount of Rs1.82 billion to its profits for the half-year period.

The company says its actual return (before financial charges and tax) is fast declining owing to Ogra’s refusal to enhance the limit that can be charged under the UFG head and certain other benchmarks fixed by the authority.

The company says UFG has increased due to the law and order situation in Balochistan; missing the target for replacement of older PUG meters; and load-shedding in both the industry and CNG sectors (which earn the company higher revenue) due to higher domestic demand.

Like other government-owned companies, SSGC is also heavily overstaffed, which directly reflects on the profitability of the company. The incumbent government has regularised thousands of employees at the SSGC over the last few years.

Published in The Express Tribune, March 1^st, 2013.

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